Climate Change Impacts on Farms May be Offset by Commodity Prices

Apr 12, 2010

American Farmland Trust (AFT) has released a comprehensive study analyzing existing data and cost-benefit studies to assess the effects of climate change legislation on the agricultural economies of Arizona, Colorado, and New Mexico.

“Overall, the research suggests that while the legislation would challenge the agriculture sector in these states, there are improved revenues from higher crop prices, new bio-fuel markets, carbon-sequestration and offsets,” says Brian Hurd, Ph.D., New Mexico State University, and co- author of the study. And co-author George Frisvold, Ph.D., of the University of Arizona notes further that “only small changes are expected in regional land use as some farmers can benefit from reducing tillage and putting land into conservation reserve and grass.”

“It’s clear that there will be a relative rise in energy and fertilizer costs. But we were surprised to learn that provisions in the legislation would likely limit fertilizer cost increases to between 0.3 percent and 2 percent by 2020, and that estimates from a variety of studies show energy cost increases of between 4 percent and 13 percent in 2020. Although modest increases, it’s always a factor for farmers who operate on thin profit margins,” adds Chris Goemans, Ph.D., a co-author from Colorado State University. “However, in many cases, the higher commodity prices that are estimated by many studies will contribute to farm revenues and could largely offset these projected cost increases.”

“The Rocky Mountain region is quite diverse and has unique agricultural characteristics,” says Anita Zurbrugg, assistant director of AFT’s Center for Agriculture in the Environment. “We wanted to learn how the agriculture sector might fare economically under various legislative proposals to limit greenhouse gasses and to learn more about the potential for agriculture to earn new sources of income for providing carbon offsets or renewable energy.”

In the western states, cattle and dairies are important segments of the agricultural economy. “Higher feed and energy prices will pose challenges,” Zurbrugg added. “Traditional ranchers, or those with significant feeding costs, could be the hardest hit―while dairies and concentrated feeding operations may be able to use methane digester technologies to generate income two ways: through carbon offsets and electricity generation.”

Zurbrugg noted that many producers perceive cost increases to be much more certain than revenue increases. “The study shows that the expected cost increases are well within the range of recent energy-price variability. I think this may give farmers some measure of confidence that we’re looking at a timeframe that should allow them time to adjust to the increases.”

A team of researchers from New Mexico State University, the University of Arizona and Colorado State University conducted the analysis collaboratively. They assessed eight existing studies and relevant reports to consider the implications of climate change legislation, such as the American Clean Energy and Security Act of 2009 (ACES), on the region’s agricultural producers, and also looked at potential land use changes and carbon offset potential.

“Climate and clean energy legislation has waxed and waned and there have been a number of economic studies,” adds Zurbrugg. “We believe it is important to have a well respected third-party like this team to review the studies and look at the various legislative and economic scenarios. Then we can better understand costs and opportunities and find good policy options.”